Stocks are stuck in stasis Friday morning, as investors wait to hear from the head of the Federal Reserve about what may be coming next for interest rates.
The S&P 500 was 0.1% lower in early trading, while bond yields were also making only tentative moves. The Dow Jones Industrial Average was up 24, or 0.1%, at 33,316, as of 9:48 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.
Wall Street’s focus is centered on Jackson Hole, Wyoming, where the chair of the Fed is set to give a highly anticipated speech at 10 a.m. Several officials have recently pushed back on Wall Street’s speculation that the Fed may ease up on its hikes to interest rates, which help corral inflation but also hurt the economy and investment prices.
Some investors expect Chair Jerome Powell to likewise try to bat down talk about such a “pivot” by the Fed. Some investors have even been speculating the Fed could cut interest rates later in 2023, as pressures on the economy mount and the nation’s high inflation hopefully recedes.
“The Fed could start thinking about a pause in rate hikes, potentially for the end of the year,” Thomas Costerg of Pictet said in a report. “However, it is still too early to talk about rate cuts.”
A report Friday morning showed that the Fed’s preferred gauge of inflation decelerated last month and wasn’t as bad as many economists expected. It’s an encouraging signal, which may embolden more of Wall Street to say that the worst of inflation has already passed or will soon.
Other data showed that incomes for Americans rose less last month than expected, while consumer spending growth slowed. The reports helped pull the yield of the 10-year Treasury down from where it was earlier in the morning, though at 3.04%, it’s a bit higher than its 3.03% level from late Thursday.
The two-year Treasury yield, which more closely tracks expectations for the Fed’s actions, edged up to 3.38% from 3.37%.
The Fed has already hiked its key overnight interest rate four times this year in hopes of slowing the worst inflation in decades, with most of the increases by more than the typical margin. The hikes have already hurt the housing industry, where more expensive mortgage rates have slowed activity. But the job market remains strong, helping to prop up the economy.
In the stock market, shares of Ulta Beauty rose 2.7% after the retailer reported stronger profit for the latest quarter than expected. Perhaps more importantly, it raised its forecast for revenue and earnings for the full fiscal year. Other retailers have been cutting their forecasts as high inflation squeezes their customers, particularly lower-income ones.